HONEST TEA'S MARKETING STRATEGY

GIVEN THE DEMAND for green practices in the marketplace, the question remains: how do emerging brands convince consumers to pay a premium for a product that exhibits the characteristics of a public good? Ryan Wiser and Steven Pickle from the Ernest Orlando Lawrence Berkeley National Laboratory believe that three specific marketing techniques can enhance the perceived value of a public good.
First, companies should appeal to community and social dynamics in order to place pressure on consumers
to avoid free-riding. In contrast to traditional beliefs about the rational consumer in a neoclassical model, behavioral economists have shown that consumer choice is influenced by social norms and values. Economists James Walker and R. Mark Isaac have conducted experiments that show that reducing the number of consumers who consume a public good and increasing the opportunity for non-binding communication between consumers decreases the incidence of free-riding.
Honest Tea attempts to increase community communication by marketing its products to specific communities and geographic regions. Honest Tea also reinforces communication between consumers by encouraging customers to participate in community programs affiliated with Honest Tea. One recent initiative, Bethesda Green, encouraged the community of Bethesda, Maryland to “promote environmentally conscious living for residents, employees and businesses.” Honest Tea also provides an avenue for consumers to develop relationships over social networking sites Facebook, Twitter, and MySpace, in an effort to engender a sense of community and common purpose among its patrons.
Second, companies that market green products can decrease the incidence of free-riding by focusing on customer retention. Davis and Holt believe that two of the most important factors affecting free-riding are repetition and experience. Their experiments illustrate that “in a single-shot game, 40-60 percent of individuals
are willing to contribute to a public good.” However,
in subsequent games, “contributions decline with repetition, and sometimes dramatically.” Economists hypothesize that decreased participation is a result of “learning effects,” where consumers learn that free-riding is profitable after observing others free-riding.
Thus, firms like Honest Tea should provide incentives for customers to continuously purchase its goods over time. A Massachusetts green energy pilot program, for example, offers special discounts, in the form of gift certificates, to consumers who make a five-month commitment to purchasing green energy. In addition, companies engaging in environmentally sustainable and ethically responsible practices should establish an ongoing dialogue with customers, so that customers are informed of the public goods they are purchasing. Honest Tea provides consumers with regular newsletters, field reports from producers in developing countries, and information on conferences that address issues of socially responsible business practices.